Former GSA Chief of Staff David Safavian was convicted on Friday for obstruction of justice and lying to federal officials concerning his dealings with disgraced former lobbyist Jack Abramoff. Safavian didn’t testify or call any witnesses. His original convictions were thrown out by the U.S. Court of Appeals for the D.C. Circuit. U.S. District Judge Paul Friedman presided at the trial and Lawrence Robbins was lead defense attorney. Justin Schur represented DOJ. Jesse Holland’s AP story is here. . . . For five years the FBI improperly instructed its agents in Iraq to over-report hours, resulting in at least $6 million dollars in improper overtime and Sunday payments, according to the DOJ Inspector General’s report. Ben Corey’s Washington Times story is here. The FBI has admitted wrongoing and says it has stopped these deceptive practices. Spencer Hsu’s Washington Post piece reports that six straight counter-terrorism chiefs condoned the false reporting. Apparently not one of these officials consulted with the FBI’s General Counsel’s Office. Agents were told, among other things, to report time spent at cocktail parties and doing laundry as overtime. One FBI employee took the position that, “When you’re in that environment, anything you do to survive is work for the FBI.” No doubt this is true in some sense. But I don’t see DOJ applying that principle to its various criminal investigations of contractor fraud in Iraq. Apparently there are special rules in Iraq for special people. . . . Meanwhile, Washington Post Personal Finance Columnist Jane Bryant Quinn here discusses two obvious red-flags that should have been apparent to Bernard Madoff’s victims: 1) His fund was audited by an obscure, allegedly rinky-dink, accounting firm with no website; and 2) The funds were held in Madoff’s own advisory firm rather than with “a large, independent financial institution that reports cash flows and trading activity to you directly.”
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Chief US District Judge Michael Mills on Tuesday sentenced Joey Langston to 36 months in prison for his role in the public corruption scandal now known as “Scruggs II” (Daily Journal, Clarion-Ledger). Langston pleaded guilty in January to a one-count information charging him with bribing Judge Bobby DeLaughter. He received the maximum sentence allowable under his plea agreement despite a a motion for downward departure filed by prosecutors last month citing his extensive cooperation. The implications for Bobby DeLaughter and Ed Peters (not to mention Dickie Scruggs) are ominous.
More: the Daily Journal hints at upcoming Scruggs II indictments, NMC’s courtroom commentary at folo, sentencing transcript (.pdf).
Rob Cox of breakingviews.com has an excellent column placing the Madoff Ponzi Scheme Fraud within the context of boom and bust economic cycles. Big frauds (or “bezzles”) like Madoff’s remain hiddden in speculative boom years and typically come to light during downturns. The dowturns are in part caused by the excesses and scams of the boom years. The bezzle theory was developed by economist John Kenneth Galbraith. According to Cox, Galbraith taught that the first frauds uncovered are seldom the largest. Thanks to Dave Westheimer for shooting this article to me.
Yahoo! News carries this AP story by Don Thompson on mortgage fraud as a booming business for federal prosecutors. Although the article focuses on the rising number of mortgage fraud prosecutions at the federal level, an important subtext is that most of the criminal cases are being brought against relative pikers. Thanks to my friend Michael Clark of Hamel Bowers & Clark for sending this piece to me.
High society investment advisor and Wall Street legend Bernard Madoff has been arrested for running what the SEC calls “a stunning fraud that appears to be of epic proportions.” Madoff was turned in by his sons. The Wall Street Journal has the story here. Losses are estimated to be in the $50 billion range. The SEC has filed suit and DOJ has issued a criminal complaint.
White collar crime is our focus, but America is our beat. And the politics of prosecution in the Department of Justice is always something that we will examine. Here is today’s Washington Post story on the indictment of five former Blackwater guards unsealed yesterday. The guards were providing security for the State Department on a dangerous convoy in Iraq. There are several troubling things about these charges, which we intend to comment on in coming days: 1) it is unclear whether a federally cognizable crime was committed; 2) jurisdiction is iffy; 3) there are serious evidentiary issues caused by the issuance of Garrity assurances to guards who were interrogated; and 4) dubious inclusion of inappropriate firearms/deadly weapons charges. More to come.
White collar cirme is our focus, but America is our beat. Besides, judicial arrogance and official incompetence are always white collar issues. So here is a column from one of DC’s local treasures, Washington Post Saturday columnist Colbert King–a one-man crusader against official arrogance, corruption, and incompetence.
King’s column concerns Jonathan Magbie, a first-time possession of marihuana offender who also happened to be a ventilator-dependent quadriplegic. According to King, the prosecutor didn’t want Magbie to go to jail, but DC Superior Court Judge Judtih Retchin imposed a 10 day sentence. Then the DC jail’s assistant medical director called the judge and requested that she amend Magbie’s sentence so that it it could be served in a hospital, since the jail was not equipped to handle Magbie’s medical condition. Judge Retchin refused to amend her order. Magbie died four days into his sentence, because he could not get access to a ventilator. Read King’s column and weep.
Carrie Johnson of the Washington Post wrote an excellent article on Wednesday about career AUSA Nora Dannehy’s continuing investigation into the U.S. Attorney firings. Here it is. The article serves as a reminder of Attorney General Mukasey’s critical decision to launch a criminal investigation of the firings, after a joint non-criminal probe by DOJ’s Office of Professional Responsibility and Office of Inspector General was stonewalled by Karl Rove, Harriet Miers, and others. Dannehy has full grand jury subpoena power. The Bush Administration has vowed co-operation. Presumably this means that it won’t assert Executive Privilege against its own Department of Justice. But even if it does, assertions of Executive Privilege usually fare poorly when weighed against the grand jury’s right to investigate potential crimes.
Eight minutes after the Government filed a one-paragraph response in opposition, Judge Emmet Sullivan granted Ted Stevens’ motion to exceed the local 45 page limit on new trial motions. The Anchorage Daily News has the story here.
Washington Post columnist Richard Cohen, an old-school liberal, doesn’t think Eric Holder should be Attorney General because of Holder’s acquiescence in then-fugitive financier Marc Rich’s pardon. In today’s column, Cohen makes out the case against Holder about as well as anyone can. Holder, as President Clinton’s Deputy Attorney General, was “neutral, leaning towards favorable” when asked to weigh in on whether Rich should receive a pardon. Holder’s non-opposition gave the Clinton Administration cover for the outrageous pardon of a filthy-rich indictee who had fled the country to avoid prosecution. Holder also neglected to inform the U.S. Attorney’s Office for the Southern District of New York, which originally brought the case against Rich, that a pardon was in the works. That office was rightfully furious when it learned of the done deal.
Okay. It was a big mistake. And some of Holder’s justifications over the years for his non-opposition to the Rich pardon have been absurd. And, yes, I know, we have recently sufferred through an Attorney General who was way too much of a yes man for the White House and who sullied the supposedly glorious reputation of the Department of Justice. But it is the President’s choice, and barring a morals charge or a major felony in the nominee’s background, President Obama should get who he wants at Mother Justice, assuming that the nominee is otherwise qualified. Holder passes this test.